I am willing to bet you have not heard of House Bill (HB) 208. It is not an exciting or high profile bill. In fact, it affects very few people, but the people it affects have money, a lot of money. It is a bill about trusts. The title of the bill is “An Act relating to trusts and powers of appointment; and providing for an effective date.”

There is a peculiar reason I am writing an article about HB 208, which I will get to later. But first, some background about trust law in Alaska is crucial in understanding why this bill exists. In 1997 the Alaska Legislature passed the Alaska Trust Act. This made Alaska an extremely good place to form a trust. Alaska remains one of the best states to have a trust because of our trust laws.

Trusts in Alaska

Not a lot of people have trusts. They are often designed for wealthy people to shield assets from taxation. According to Fidelity, “A trust is traditionally used for minimizing estate taxes and can offer other benefits as part of a well-crafted estate plan.”

So if very few people have trusts, why did the Alaska Legislature pass the Alaska Trust Act in 1997? The simple explanation – to attract people with lots of money to open trusts in Alaska. Like lots of legislation, someone was behind it. Enter Jonathan Blattmachr. Blattmachr is an interesting character who has a long history in Alaska. According to this 1997 Forbes article titled, “Flimsy shelters“:

Jonathan Blattmachr, a partner at the prestigious New York firm of Milbank, Tweed, Haley & McCloy, dreamed up the Alaska law that created the new trust. He is the brother of Douglas Blattmachr, chief executive officer of Anchorage-based Alaska Trust Co. Brother Doug’s firm was responsible for lobbying to get the law passed through the Alaska legislature.

In 2016, Jonathan Blattmachr gave an interview to Bridget Crawford, a professor at the Elizabeth Haub School of Law at Pace University. To get the full history and picture of the Blattmachr brothers, I suggest reading it. He talks about coming to Alaska to hunt and fish in the 1970s. He also talks about his role in the Alaska Trust Act, and how his brother, Doug, became the head of the Alaska Trust Co., now Peak Trust Co.

If you have not guessed by now, the Blattmachr brothers are back, supporting HB 208. In Jonathan’s interview he said something that explains why he chose Alaska. It is much easier to get legislation passed in Alaska than in New York. Here is the excerpt from the interview:

An Interesting Development

HB 208 was introduced by Representative DeLena Johnson (R – Palmer) last year. Why she would introduce a bill about trust law in Alaska is anyone’s guess. I doubt many of her constituents in the Valley care about trusts or trust law. I’m sure someone convinced her it was a good idea.

It was heard in the House Judiciary and Finance committee last year. It was voted on in the house on 5/5/2017 and passed 26-7, with 7 excused. It then headed over to the senate. It has been quietly making its way through the senate since the current session began in January. It recently made a stop in the Senate Judiciary Committee.

At this point, very few people were aware of this bill. And for the ones that were, even fewer understood it. The language in the bill is extremely hard to understand. There are lawyers who only practice trust and estate law. They are probably the only ones who understand the bill.

Senator Bill Wielechowski (D – Anchorage) sits on the Senate Judiciary Committee. He is a lawyer. In fact, he is the only practicing lawyer in the senate. He found some issues he thought needed to be addressed and decided he would offer some amendments.

Understanding the bill would require an attorney, and some scotch. A few of the things it includes are removing the fiduciary obligation of the trustee and removing the reporting requirements to the beneficiaries to changes in a trust. I am by no means an expert on trust law, I honestly know very little about it. Maybe this bill is great and maybe there are good reasons for it. But on the surface it seems to mostly benefit the people setting up the trusts, not the beneficiaries.

Wielechowski introduced five amendments. According to a statement he made in the Judiciary Committee, he worked with the bill supporters and they agreed to two of his five amendments. If it would have stayed that way, the bill would have likely been voted out of the committee. And you would not be reading this.

But 32 minutes before the committee meeting, Wielechowski said he was sent an e-mail that the supporters had changed their minds and would not be supporting his two amendments they had agreed to support. Bad idea. Wielechowski then decided to introduce all five of this original amendments! This is where it starts to get interesting.

I heard from someone in the Capitol that DeLena Johnson was upset that Wielechowski was messing with her bill. It is the legislature, DeLena. Why does she care so much about a trust bill? This made me curious so I called her office to ask her some questions about the bill. I have yet to hear back from her.

Before all of this, few people were aware of the bill, and the bill supporters brazenly claimed “all estate planning attorneys” in Alaska “strongly supported” the bill except one. After the hearing, and the broken promise by the bill supporters, Wielechowski decided to contact the Estate Planning Section of the Bar Association to see if it was true that every estate planning attorney supported the bill.

And boy have the comments poured in. Apparently, at least fifteen attorneys have written in opposing the bill, with most saying they had not even known about it. One national expert wrote in that some changes were “earth shattering” and called the bill “dangerous.”

If the supporters of the bill did not change their mind on the amendments, it probably would have left the committee and been passed by the senate.

While this bill affects very few Alaskans, it highlights a very interesting problem in the legislature. How many other complex bills fly under the radar in Juneau because of a lack of expertise in the legislature? Besides the legislators and their staff, most of the people in the Capitol are lobbyists or people representing special interests. Even for the people that pay attention, not many can understand a bill this complex, let alone testify about it. This makes Alaska a prime time location for people like the Blattmachr brothers.

Like Jonathan said, “I had wanted it for New York because that was the primary place I practiced, but I knew it would take me hundreds and hundreds of hours to convince people that this made sense.”